[alcimedes]

Green tech. needs to be able to compete with current energy markets on its own two feet, not by making current energy more expensive.

Cheap energy is what drives economies, and cheap labor.

So what's the final multiplier on having the Gov. spend money on construction?

Do those numbers take into account not just taxes/wages/spending but also the offset of not having to pay this person medicaid/unemployment/lost housing etc.?

[zippy]

Originally Posted by jcoley2 Actually, you are incorrect. Tax cuts have a 3-1 multiplier effect. They are the best bang for the buck to stimulate the economy. If fact, lowering corporate taxes (both payroll and corp income taxes) would be the single best idea to jump start the economy. Individual corporate tax rate reductions on capital formation would be the next best idea: lower taxes on dividends, interest and capital gains. Most other options in this "stimulus" (let's start calling it what it is: "spending") package have horrible track records on stimulating the economy. Most of the transfer payments which make up the vast majority of the bill have less than a 1 time multiple--meaning that cost more than what they benefit the economy. Here is a good example: the bills contains incentives to train new workers to be trained as "green technology" workers. Sounds great, right? These workers can acquire new job skills and it is estimated that they can earn $60-80,000/year in these new positions. But guess what: you know how much the tax incentives are to do this are? $250,000-300,000/worker!!! Now that's not going to stimulate the economy, but rather be a drag as we compound interest on the debt to pay for that worker and ultimately the principal. You need to look to history as to what worked and what did not work in fiscal stimulus. This bill is a waste, and more importantly, will jack interest rates up over time (as we have to borrow the money). More importantly, the transfer payments will create another entitlement class that will be hard for any Congress or President to take away down the road. The bill is the single worse thing that the US Government has ever proposed in our lifetime!!

Um yeah, OK. We already did the tax cut, tax rebate thing and it didn't work. Why will it suddenly work this time?

And regarding the "(let's start calling it what it is: "spending")" - that's kinda the point. We are Spending money to Stimulate the economy. This isn't some kind of double-speak code word that they're trying to slip by people. Let go of the paranoia.

And for everyone who wants to argue the whole "let the free market find a fix for this" and "this isn't something for the Government to solve" let's please remember that it was the business/financial sector that got us into this whole mess - I have no faith in them at this point in coming up with a solution. Why should I?

[curiousuburb]

Now where did I hear 'tax cuts will solve everything'?

Oh yeah... the last 8 years of trickle-down-trust-us neocons (despite evidence it failed the last time it was tried under Reagan).

How'd that policy go this time?

Oh yeah... from record budget surplus in '99 to record deep in the shitter '08.
Unprecedented corporate greed. Wider gap between rich and poor. Financial collapse.

Forgive me if I'm a bit skeptical of the 'all-it-takes-is-tax-cuts-trust-us' blowhards. Time for a fresh approach and a bit more balance.

[Banana]

Um, the past tax cuts didn't work because 1) it was a break for cronies and special interest, rather than a general tax cut but more importantly 2) it wasn't accompanied by a cut in spending and contraction of government intervention. Both Reagan and Bush promised tax cuts and small government; delivered in bad faith for former and completely failed on the latter.

So it's certainly not "it just takes a tax cut", and definitely not "it just takes extra spending".

[ezkcdude]

Originally Posted by Banana Um, the past tax cuts didn't work because 1) it was a break for cronies and special interest, rather than a general tax cut but more importantly 2) it wasn't accompanied by a cut in spending and contraction of government intervention. Both Reagan and Bush promised tax cuts and small government; delivered in bad faith for former and completely failed on the latter. So it's certainly not "it just takes a tax cut", and definitely not "it just takes extra spending".

I said this in the first post. Tax cuts won't work when people are unsure about their employment. Most of it will be saved or used to pay down debt until the economy picks up again - which is why the government must be the "spender of last resort".

It's really amazing how Republicans think tax cuts are the solution for everything. Of course, there would be a time when they would have to come up with something else - when the marginal tax rate goes down to 0%!!! I mean just think about it logically. At some point one would think that we have arrived at a "perfect" tax rate - but for Republicans, this never seems to be in reach. It's always "lower than what we have now". That made sense during the Carter years, but it doesn't now.

[Banana]

It sound all great but you have to answer the question of "where is the money coming from?"

There is no free lunch to be had, and spending ourselves into debt atop a mountain of debt is certainly is not going to get us a lunch.

Nobody was listening to David Walker, and he was warning when the times was good, long before mortgage crisis blew up. After spending more money, we're saying "spend more!"

Look, all I've been hearing is "less taxes! more spending!", and we've been getting both a-plenty. Both camps got what they wanted. Forgive me if I don't feel at all confident that it'll fix anything.

[ezkcdude]

Originally Posted by Banana It sound all great but you have to answer the question of "where is the money coming from?" There is no free lunch to be had, and spending ourselves into debt atop a mountain of debt is certainly is not going to get us a lunch. Nobody was listening to David Walker, and he was warning when the times was good, long before mortgage crisis blew up.

Very simply, it comes from people buying US treasuries. It's funny for the GOP to be complaining about spending now, when it is actually necessary, as opposed to 2003, when it was optional. Oh, wait, as Barney Frank said on MTP Sunday, there is something that Republicans will always agree with - spending on military.

[Banana]

Originally Posted by ezkcdude Very simply, it comes from people buying US treasuries.

and that's not a free lunch. It'll have to be repaid, with interest. We've been operating on deficit budget for years, if not decades. Show me *anyone* who successfully has run just five years of deficit budget, had already squandered the savings or didn't have any to start with, and not declared bankruptcy and I'll shut up. To think that government should be exempt from that inconvenient responsibility is silly.

[ezkcdude]

Originally Posted by Banana and that's not a free lunch. It'll have to be repaid, with interest. We've been operating on deficit budget for years, if not decades. Show me *anyone* who successfully has run just five years of deficit budget, had already squandered the savings or didn't have any to start with, and not declared bankruptcy and I'll shut up. To think that government should be exempt from that inconvenient responsibility is silly.

Interest on 30-year treasuries? Not that great a return, if you ask me.

Didn't Reagan have a deficit the entire time he was in office, due to tax cuts and military spending that was out of control? BTW, under Clinton we had a surplus. What happened to it?

[Banana]

Originally Posted by ezkcdude Interest on 30-year treasuries? Not that great a return, if you ask me.

Even if it's only 0.5% or less, it does come at a cost, and we're talking a chunk of money.

According to Bureau of Public Debt, interest cost $451 billion atop $10 trillion of outstanding public debt. or 4.5% of the debt. Certainly a better deal than an average credit card debt, granted, but debt is debt, whether it comes with pink frilly ruffled dress or not. The stimulus package we're talking about easily is 10% of the current outstanding debt, and we didn't even consider the bailout package. As I've alluded to earlier, if you're up to eyeball in debt, do you go out and spend even more and hope you make money to pay off your old debt? Unlikely. At this point, the best thing is to quit pursuing high-risk activity, cutting losses and tightening belts and spending only on the necessities until things change for better.

Oh, please do leave out partisan finger-pointing. If you've missed, I've berated both camps for cutting taxes and spending too much. The only solution neither camps has tried is butting out. I'm kinda of getting tired of either camp jumping up and down and yelling "Fire!" everytime someone farts.

[bassplayinMacFiend]

Originally Posted by ezkcdude I said this in the first post. Tax cuts won't work when people are unsure about their employment. Most of it will be saved or used to pay down debt until the economy picks up again - which is why the government must be the "spender of last resort". It's really amazing how Republicans think tax cuts are the solution for everything. Of course, there would be a time when they would have to come up with something else - when the marginal tax rate goes down to 0%!!! I mean just think about it logically. At some point one would think that we have arrived at a "perfect" tax rate - but for Republicans, this never seems to be in reach. It's always "lower than what we have now". That made sense during the Carter years, but it doesn't now.

I'm sure tax cuts will help the million people laid off in the last 60 days. Really, if you aren't making money, then you aren't paying taxes. I don't see how any type of tax cut would help these people. For the rest of us that would save a few hundred dollars in taxes, that's just a reminder of how screwed we truly are.

[zippy]

Originally Posted by Banana Um, the past tax cuts didn't work because 1) it was a break for cronies and special interest, rather than a general tax cut but more importantly 2) it wasn't accompanied by a cut in spending and contraction of government intervention. Both Reagan and Bush promised tax cuts and small government; delivered in bad faith for former and completely failed on the latter. So it's certainly not "it just takes a tax cut", and definitely not "it just takes extra spending".

While I wholeheartedly agree that the tax cuts recently have been heavily weighted on the side of the wealthy, I will remind you that they did cut rates for most others as well, and gave us rebate checks and stimulus checks...

The problem with such things is that they don't create jobs. Surveys have shown that most people ended up saving or paying off debt with their rebates/stimuli. This stimulus plan, however, is focused on putting people to work and working people are the true foundation of the economy. Right now, we are losing them by the boat-load and we need to reverse that trend ASAP.

You've heard the adage about giving someone a fish vs. teaching them to fish I assume. Well this isn't so much teaching them to fish, but giving them a fishing pole and a place on the river/lake to cast it.

[cosus]

Let me say this: "I'm very pro-kensyian economics."

I believe the government should increase taxes first off. Yes this may be unpopular, but it give the government increased income and lowers the saving rate of people. Keep in mind, while saving is good for the individual, it's bad for the country. Next I feel the government needs to go on a massive public works project. Screw road that this entailed in the New Deal, but rather all forms of education, building school, more teachers, more universities, and most of all, more R&D.

Now while infrastructure shouldn't be entirely ignored, we do need more energy, solar, clean coal, nuclear... You might have qualms with any of these things, but really, there isn't much choice. It also has direct positive correlation with GDP.

Next we need to increase the progressive tax. Far less for the middle class and accordingly higher for the upper calls. The wealthier you are, the more you save and the less you are helping the economy. Trickle down effect my ass.

Unless you are promoting investing, tax cuts really do not help, they might feel good to use, but in reality, we just don't spend all that we get for the tax cut where as public works does.

[ezkcdude]

Originally Posted by Banana According to Bureau of Public Debt, interest cost $451 billion atop $10 trillion of outstanding public debt. or 4.5% of the debt. Certainly a better deal than an average credit card debt, granted, but debt is debt, whether it comes with pink frilly ruffled dress or not. The stimulus package we're talking about easily is 10% of the current outstanding debt, and we didn't even consider the bailout package. As I've alluded to earlier, if you're up to eyeball in debt, do you go out and spend even more and hope you make money to pay off your old debt? Unlikely. At this point, the best thing is to quit pursuing high-risk activity, cutting losses and tightening belts and spending only on the necessities until things change for better.

The average credit card rate is ~14%. When you compound the interest, that's a huge difference. In fact, the 4.5% 30-yr rate is not much more than inflation - so we're actually talking about borrowing money at very low rates here. At those rates, you'd be crazy not to borrow, assuming you thought you could beat 4.5% returns.

To put it another way, let's say I could borrow XXX amount of dollars right now at 4.5% interest, and invest it in the market. In 30 years, compare the amount of interest I would pay back versus my return in the market. That would be a great deal, even with a recession or two thrown in to the mix. Now, if interest were 14.5%, this strategy wouldn't make any sense. That math should be obvious.

[cosus]

People need to stop seeing house as investments. If people realize that if they invested in a mutual fund with a conservative 7% return and purchased a smaller home, they would make significantly more money. A house is a way of life, not your retirement fund. See: WSJ (link coming shortly)

[alcimedes]

I don't think you can "beat the returns" on a loan if you're just using the money to pay off someone else you owe.

We're borrowing in part to pay off other borrowing.

[ezkcdude]

Let's say I owe 17% on a credit card. Wouldn't it make sense to borrow at 4.5% to pay it off sooner?

People talk about debt as a percentage of GDP being 60%. That sounds like a huge number, but what does it really mean? Anyone who owns a house likely has a huge debt. And amazingly enough, people who own houses and huge debts, still find the means (until recently) to borrow all the time to pay for cars, college, startups, etc.

Look at the following chart. It turns out the debt ratio was as high as 120% during WWII (obviously due to war time borrowing), and went way down to near-20% in the 1970's. Would one say that the 70's were roaring and grand?

[billybobsky]

Originally Posted by alcimedes I don't think you can "beat the returns" on a loan if you're just using the money to pay off someone else you owe. We're borrowing in part to pay off other borrowing.

Um, isn't that called re-financing at a lower interest rate?

[ezkcdude]

It's so nice to have a President again who can actually speak in coherent sentences.

[alcimedes]

The issue is that it's not 30 year T-bills that are being bought/sold. It's shorter term loans owned by other countries, not US citizens. It's less stable, and the people holding the debt don't care about returns over a long haul at this point as much as returns for the next 6 to 12 months.

Don't get me wrong, I don't think we should pass on the stimulus this time, especially if it actually goes to specific projects to help sustain jobs.

I do, however, think it's very dangerous to just keep borrowing more and more money and pushing off when you'll pay it back into some distant, unplanned "future" where it's not our problem.

I also can't help but notice looking at those graphs, the gap between gross and public debt is wider than ever before, and shows no signs of going back.

[jcoley2]

Originally Posted by ezkcdude It's so nice to have a President again who can actually speak in coherent sentences.

Are you kidding--he is doing horrible tonight. Stumbling everywhere. . .

[jcoley2]

Originally Posted by alcimedes The issue is that it's not 30 year T-bills that are being bought/sold.

FYI, there is no such instrument. (Take it form a guy that traded and sold them for 20 years.)

Here's a quick primer:

T-Bills: 0-365 Days
T-Notes: 1 - 10 Years
T-Bonds: 10 - 30 years


Hope that helps!

[alcimedes]

Ah. I stand corrected.

My understanding then is the debt has started to shift to T-bills instead of T-bonds.

[jcoley2]

Originally Posted by alcimedes Ah. I stand corrected. My understanding then is the debt has started to shift to T-bills instead of T-bonds.

That's a different issue: you are correct. Until recently the US Treasury was borrowing more and more in the short end of the yield curve (i.e., T-bills to 2-year notes), but that is all about to change with a $800 B+ Stimulus/Spending bill. The Treasury last week announced that the are bringing back the 7-year note auctions and also double the size of the 30-year auctions.

[Brave Ulysses]

Originally Posted by jcoley2 Are you kidding--he is doing horrible tonight. Stumbling everywhere. . .

Yea, he was not very smooth last night... and in many ways, I still think he needs to learn he's not on the campaign trail anymore.


I also find it hard to trust his supposed desires for bipartisanship when he constantly attacks and belittles the other side and his biggest argument is that he is not republican. Whether his criticisms, attacks and arguments are valid or not, they sure aren't going to make republicans any more enthusiastic about working with him.

if change is truly here I would like it if he just stopped talking about the previous 8 years and considered it the past and start defining his own destiny. He's just falling into traps and his handling of this stimulus package has left a lot to be desired.

[jcoley2]

My favorite parts of the night were:

1. How he cut off Helen.
2. How he threw Joe under the bus

(I suspect that latter will be common going forward! SNL already having a field day with Joe.)

[ezkcdude]

Originally Posted by Brave Ulysses if change is truly here I would like it if he just stopped talking about the previous 8 years and considered it the past and start defining his own destiny. He's just falling into traps and his handling of this stimulus package has left a lot to be desired.

Guess what? The American people spoke up in the last election and the GOP still isn't listening. It's about jobs, baby. Jobs.

It's about change. Change from the way things have been run into the ground over the last 8 years.

[Banana]

Originally Posted by ezkcdude The average credit card rate is ~14%. When you compound the interest, that's a huge difference. In fact, the 4.5% 30-yr rate is not much more than inflation - so we're actually talking about borrowing money at very low rates here. At those rates, you'd be crazy not to borrow, assuming you thought you could beat 4.5% returns. To put it another way, let's say I could borrow XXX amount of dollars right now at 4.5% interest, and invest it in the market. In 30 years, compare the amount of interest I would pay back versus my return in the market. That would be a great deal, even with a recession or two thrown in to the mix. Now, if interest were 14.5%, this strategy wouldn't make any sense. That math should be obvious.

You're forgetting that we're adding *more* debts, as opposed to merely re-financing to improve returns/cutting losses. I already cited bailout packages in addition to stimulus package being talked right now. That's 20% more debt being created in span of six or months.

I also have to remind that we've been running on deficits and will likely do so again this year and perhaps for rest of Obama's terms. At what point will we *not* have a deficit? In Keynesian framework, a little inflation is good because that promotes spending, which appeals to politicans because they can now run on deficits and claim it's good for economy. But they're forgetting that money supply is neutral in regards to any measure of wealth. It really doesn't matter whether we are trading in gold Eagles, American Dollars or Zimbabwean Dollars, the cost of a given good is still the same being merely quoted in different units for each potential money. The fallacy here is that money is regarded as a store of value, when it's actually a medium of exchange. Yet, no matter how one monkeys with the money supply and how it is denominated, the real prices for various goods will remain unchanged until the supply or demand curves changes.

The stimulus is based on just that premise, and within Keynesian framework, it makes sense to spend during hard times. However, this misses out on the question of funding such move, and looking at how we've been spending for decades, it seems to me that government is in fact responsible for encouraging and creating boom-bust cycles with setting interest rates via Federal Reserves (if only a quasi-private institution with some Congressional oversight... whatever it means), running deficit after deficit and continually expanding money supply thus creating inflation. It may been AIG that cooked up the crooked scheme of credit swaps, but they certainly were abetted by Greenspan's interest rates cuts and government intervention in effort to increase homeownership.

On top of all this spending, cutting taxes in name of promoting consumership/increasing prosperity/bringing good times/whatever excuses they used, they're telling us to do more of same? That's definition of insanity, isn't it? And the argument is over whether we should cut tax or spend more!!!

[ezkcdude]

You can't have it both ways. You can't criticize Obama for doing something that needs to be done, while at the same time blaming him for the debt that has accrued to this point and for increasing that debt, which he must now do. It's not fair to him, and it's not really a logical argument.

The question: Should we pass a stimulus now or do nothing? It's either yes or no. If you were Obama, what would you do?

[jcoley2]

Originally Posted by ezkcdude The question: Should we pass a stimulus now or do nothing? It's either yes or no. If you were Obama, what would you do?

Sounds like we should have a poll. But I vote No.